Using Personal Funds for Business Purchases

[joannefairclough]

We have made several purchases for our business (Ltd company) using personal credit cards and in order to reclaim the VAT we have recorded these purchases as being made from a Directors Loan Account. We have then loaned the Company money to cover these purchases, entering the loan as a receipt into the Directors Loan Account and reducing the balance. Monthly loan repayments are then being made out of the current account straight to our personal account and in turn we are making payments on the credit card.

Is this the correct way of recording these purchases or should we have recorded these under a different account?

[brucedenney]

Sounds unclear.

You need to enter the purchases as purchase invoices there are 2 options for this

a) supplier ledger (not much point as they are paid and there is no need to track payment)

b) bank payment

I suggest that you set up a "dummy" bank account you can think of this as your "personal pocket" anything you purchase on behalf of the company gets entered as a bank payment from your "personal pocket" bank account. any money you put into your "personal pocket" is an interbank transfer.

At year end you just need to get the bank account to zero with a transfer to the "directors loan account" which you can reverse after year end.

If you wanted to be clever you could create the bank account with a number next to directors loan and save the hassle of doing transfers at year end.